MAI Asks Judge to Lift Stay on Its Bid to Take Over Prime Computer
MAI Basic Four Inc. of Tustin asked a federal judge Tuesday to lift a court order blocking its $970-million bid for Prime Computer Inc. and tried to answer questions about the financing of the deal.
In court documents responding to a judge’s concerns, MAI said that Drexel Burnham Lambert Inc. is confident that it can raise $875 million to finance the takeover despite its guilty plea in a massive securities fraud settlement in New York.
U.S. District Court Judge A. David Mazzone last month said MAI needed to make disclosures about the relationship between Drexel and New York investor Bennett S. LeBow, who controls MAI Basic.
Mazzone also said MAI, which makes computers for business applications, concealed information concerning past securities law violations or alleged violations by LeBow and William Weksel, another principal in the takeover bid.
MAI said that Drexel has been the primary financier for LeBow and some of his companies since 1986, and owns 7% of MAI’s common stock.
If the takeover goes through, the disclosures said, Drexel Burnham will earn $33 million in financing or advisory fees, may perform future work worth $22 million in fees and will be allowed to buy more MAI stock at a discount.
MAI also said that Weksel agreed to turn over $208,000 in profits realized from a separate stock sale as part of a consent decree with the Securities and Exchange Commission in 1986. LeBow has been sued in connection with that case but no action has been taken against him by the SEC, the disclosures said.
Drexel last month agreed to plead guilty to six felonies and pay a record $650 million in fines and restitution to settle the securities fraud case.
Prime, a minicomputer manufacturer based in Natick, Mass., said the financial disclosures do not provide enough information on the deal and that the company will fight to keep the court order in place.
Prime said in a statement that the documents do not adequately explain how MAI plans to meet federal requirements on using the takeover target’s own stock as collateral for loans to finance the deal.
As of Jan. 19, 70.9% of Prime’s outstanding common stock had been tendered to MAI, said spokeswoman Toni Lee. The company has extended its tender offer until Jan. 30.
But Prime spokesman Richard Eckel said that because of the firm’s convertible debentures--bonds that the bearers can convert to common stock--the tenders represent only about 53% of Prime’s total outstanding stock on a diluted basis.
One of the conditions of MAI’s original tender offer was that the company control 67% of the fully diluted stock, Eckel said.
In a related action, MAI released a letter to Prime blasting the company for an “unnecessary, exorbitantly expensive and clearly unsuccessful program” to convince shareholders not to accept MAI’s offer.
The letter from LeBow points out that a majority of shareholders have accepted the tender offer and calls on Prime officials to negotiate.
